New regulations for brokerage fees
As of December 23, 2020, a modified form of the ‘whoever appoints the broker pays the broker’ principle for tenants and landlords, which came into force in 2015, will be extended to cover real estate purchases and sales by the Act to Regulate Agents Fees. This was decided by the two legislative bodies of the German parliament, the Bundestag and Bundesrat, in the summer. Once the new law comes into force, agents’ fees will be shared between buyer and seller – regardless of which of the parties commissioned the agent.
What will change?
Ever since the new legislation was announced, lots of buyers and sellers have contacted us to ask what the new law means for them. The new law is designed to cut the costs associated with buying condominiums and single-family homes and to establish a uniform approach to agents’ fees across the whole of Germany. Will this make agents’ fees more competitive? After all, the seller now has to pay some or even all of the agent’s commission. Previously, in Berlin agents’ fees were usually paid by the buyer.
What are the new commission sharing models?
What impact will the new law have on buyers and sellers? And which models best suit both parties? If you have any questions, we would happy to explain the details in a personal consultation. Our team is on hand to help you find the best option for your property sale. We look forward to hearing from you.
An overview of the various commission models
Basically, there are different options to apply the new law, of which two variants will probably emerge as the most common:
Where an agent acts on behalf of both parties to a transaction and concludes a brokerage agreement with both the seller and the buyer, the buyer and the seller will both pay an equal share of the agent’s fee. If the agent is providing services to the seller free of charge, the agent must do the same for the buyer.
In another variant, the agent may be commissioned by the seller. In this case, there are two options: Either the seller pays the agent’s fee or the buyer and seller share the fee. If they share the fee, the buyer may be required to pay a maximum of 50% of the agent’s fee, but only after the seller has paid their share of the fee. If the seller is paying is paying the full fee, the agent is not allowed to conclude a brokerage contract or commission agreement with the buyer. For this reason, agents are not allowed to market properties to buyers as “commission-free” because this would imply that a brokerage contract has been concluded with the buyer and would oblige the agent to waive any fee for the seller.
Are you the owner of a property and have questions about the different models? We are always available for a free consultation.
Would you like to purchase a property and are not sure what the new law means for you? Feel free to contact us at any time.
What are the exceptions?
The new law on agents’ fees only applies if the real estate buyer is a private consumer and is buying property for themselves or as a private landlord. If this is not the case, the new law on agents’ fees does not apply and the parties are free to make their own arrangements.
How will the law affect purchase prices?
To what extent the new law will affect purchase prices remains to be seen and will vary from transaction to transaction. It is also not yet clear whether buyers will really benefit from the new regulations and how the market will develop as a result of the new law. This is because some contract models increase the land transfer tax. We would be happy to give you our professional assessment and advise you on all questions concerning the new law.
David Borck Immobiliengesellschaft
Schlüterstraße 45 | 10707 Berlin | email@example.com
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